EUR currency drops again | Tirana Times

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TIRANA, Mar. 5- Europe’s market currency euro has dropped again after a rise it had received in the past two weeks. Throughout the month of February euro gained 2 points against Albania’s official currency Lek, but lost it again. The Bank of Albania currency for one euro is at (maximum) 124.9 lek.

Euro has had a fluctuating value over the past 10 months. After the peak season in summer euro started dropping in September 2018, then hit a five-month low in October of the same year, where it was in a balanced 126 lek per euro. These values that euro had received are the lowest since a decade.

Market actors admit that this drop was expected because the evaluation of euro came from temporary factors that were connected to the profits transfer of major companies, which imposed an increase in the demand of euro in the internal market. Data from the Bank of Albania claim that the outgoing revenue from investments amounted to 296 million euros, most of which were profits transferings.

The BoA bought a 500 million euros Eurobond issue in 2018 to combat the free fall of the euro comparing to the local lek. Euro’s free fall has had a series of negative effects for Albania’s highly euroised economy, mostly hitting Eurozone-destined exports, local producers facing tougher competition from cheaper imports and sizeable Euro-denominated savings and remittances.

On the positive side, repayment of loans became cheaper for about half of borrowings denominated in euro and the government’s external debt although the government was forced to revise down its 2018 budget on lower tax income from imports due to the euro-depreciation effect. Using a fast-track procedure known as the ‘normative act’ intervention for the second time after a similar review in mid-2018, the ruling Socialists have proposed to cut both initial spending and revenue targets on the 2018 budget by 2.8 billion lek (€22.6 mln).

In its 2019 budget, the government cited the euro’s free fall effect hitting customs revenue as the main reason behind the revenue underperformance. The finance ministry says the depreciation of both the euro and the US dollar has negatively affected customs income for all categories of imported goods, hitting revenue by 6 billion lek (€47.8 mln) for the first eight months of 2018 and expected the blow to extend to 9 billion lek (€71.7 mln) for the whole year. On the positive side, the euro’s free fall has reduced interest rates on sizable Euro-denominated loans for both the Albanian government and businesses and households.

The market now is back to its normal standard where the offer for euro is higher comparing to its low demand. Its local circulation is also rather low. According to the BoA the actual value balance that euro is maintaining is 124-126 leks per euro.

The BoA has foreseen that the currency exchange market will be stable this 2019 comparing to last year when euro reached its lowest value since a decade. This came due to uncommon factors such as banks’ capitals conversions and a loan given from the European Bank for Reconstruction and Development (EBRD) to Albanian Power Corporation (KESH).